Net sales are $3,250,000, beginning total assets are $1,400,000, and the asset turnover is 2.5 times. What is the ending total asset balance?
A) $1,300,000
B) $1,200,000
C) $1,400,000
D) $1,500,000

Question

Quizplus · Accepted Answer

Asset turnover is calculated as Net Sales divided by Average Total Assets. Given the asset turnover is 2.5 times, we can set up the equation: $3,250,000 / Average Total Assets = 2.5. Solving for Average Total Assets gives $1,300,000. Since Average Total Assets = (Beginning Total Assets + Ending Total Assets) / 2, we have $1,300,000 = ($1,400,000 + Ending Total Assets) / 2. Solving for Ending Total Assets gives $1,200,000.

Net Sales Are $3,250,000, Beginning Total Assets Are $1,400,000, and the Asset